Promise Homes Lands $200 Million Debt Facility, Marking One Of The Largest Capital Raises For A Black Company
In a landmark transaction, The Promise Homes Company has closed on a $200 million institutional debt facility from the global investment management firm Barings.
The facility is part of a recapitalization to form a new joint venture with other institutional investors to grow Promise Homes’ portfolio of single-family rental homes to an institutional scale, per a news release.
It will provide investors expanded access to Promise Homes’ model of resident empowerment and attractive returns. It too will provide financial empowerment offerings to thousands of new residents.
Atlanta-based Promise Homes describes itself as one of the nation’s largest minority-owned managers of institutional-quality, single-family residential rental property, centered on working with middle-and-working residents. The company’s existing portfolio of 663 homes is seeding the joint venture. Promise Homes reported it plans to continues to pursue additional institutional equity and debt capital to grow the portfolio to more than 10,000 homes over the next two to four years.
The transaction is reportedly one of the 10 largest capital raises for a Black-owned company over the last decade. Debt financing typically happens when a business raises money for working capital or capital expenses by selling debt instruments to individuals or institutional investors. For providing the financing, they become creditors and are promised the principal and interest on the debt will be repaid.
John Hope Bryant, founder, chairman, and CEO of Promise Homes, will continue to lead the organization as managing principal. He is the largest individual shareholder of the fresh joint venture. Promise Homes also works with Operation Hope, the nation’s largest financial literacy nonprofit; Bryant serves as its founder, chairman, and CEO. The organization provides financial and access to credit.
Promise Homes reportedly pays Operation Hope to offer counseling to its residents.
In order to get the deal, “I had to perform. I had to be good. I had to hit my numbers,” Bryant said on CNBC’s Squawk Box. “And I had to have a business plan at work. But I also had to have access and have the right relationships to be able to get in the right doors.”
He also stated, “This transaction provides an unparalleled proof point that Promise Homes’ mission of ‘doing well by doing good’ can in fact be profitable for all stakeholders.”
Reflecting on the transaction, William Awad, head of the global private structured finance group at Barings, said, “We are excited to partner with Promise Homes, which has proven that providing housing at affordable prices and free financial coaching and incentive programs for residents can be good business.”